A credit card is basically a financial tool that allows you to borrow money from your bank, in order to meet your necessary expenses, whilst giving you the luxury of repaying the amount later. A credit card offers you a line of credit that can be used to make necessary payments. However, this amount must be paid back to the bank on the due date as mutually agreed upon by the bank and the card holder.
Loan against a credit card is basically a type of personal loan, which you can take against the pending limit of your credit card. Borrowing a loan against a credit card involves no documentation process, unlike a personal loan.
You can learn more about the details of a credit card here.
What is Loan Against Credit Card?
Loan against credit card is basically a funding option that is available to credit card holders instantly. The loan is offered against the unutilised credit limit of the financial instrument. Here’s what else you need to know about a loan against credit card-
- You can avail of a loan against the unutilised limit of your credit card in an instant
- Loans against credit card have an interest-free period of up to 90 days, which makes these loans quite affordable for all credit card holders
- Borrowers can make easy repayment of the loan against credit card in installments
What are the Benefits of a Loan Against Credit Card?
Borrowing a loan against credit card offers multiple benefits as listed below-
- These loans are disbursed quickly as they do not involve any documentation process
- The amount that you would receive as a loan against credit card can be transferred directly to your bank account, which makes is easier for you to use the borrowed amount
- Low interest rates are applied on loans against credit cards, which makes these loan economically viable
- You can get the loan amount instantly upon placing a request
- The application procedure for loans against credit card can be done online or telephonically in a few simple steps
- You can apply for this type of loan anywhere and at any time
- There is minimal processing fee for such loans
- Borrowers can repay the loan amount in easy monthly installments, which will be billed to your credit card every month
- These loans are generally sanctioned for a time period of 24 months (2 years)
Who should Borrow a Loan Against a Credit Card?
First of all, if you are somebody who owns a credit card and needs money to meet any urgent/unforeseen expenses, then you can go ahead to borrow a loan against a credit card. There are certain eligibility conditions that you should meet before you apply for a loan against your credit card-
- You should be an existing customer of your credit card’s bank (only a few banks offer loans against credit cards to new customers)
- The borrower must mandatorily have a credit card
- It is important for the borrower to have a good credit score and an impressive record of credit repayment
Before you apply for a loan against a credit card, you must carefully review your credit history using internet banking, mobile banking or by visiting your nearest bank branch.
Also, it is important to note that once you borrow a loan for an amount higher than your credit card withdrawal limit, against the unutilised limit of your credit card, your bank may block your credit card for further use till the time your loan account comes down and the remaining loan balance becomes lesser than your credit card withdrawal limit.
Documents Required for Borrowing a Loan Against a Credit Card
In most cases, there is absolutely no documentation process involved in the process of borrowing a loan against a credit card. This is because to borrow a loan, you must mandatorily have a credit card, and to get a credit card, you would already have submitted the required documents. Till this time, you would have built a healthy relation with your bank, against which you can easily get a loan against your credit card.
However, when you apply for a credit card, you need to present the following documents-
- Copy of Address Proof
- An identity proof
- Recent passport size photographs
- Last 3 months’ salary slips (only for salaried employees)
- Copy of the office ID card (only for salaried employees)
- Attested copy of the latest ITR (only for self-employed applicants)
- Copy of PAN Card (only for self- employed applicants)
How to Apply for a Loan Against Credit Card?
You must follow these steps to apply for a loan against credit card-
- Visit the official website of your credit card company or any other bank from which you wish to borrow a loan against credit card
- Fill in the form and submit it along with the required documents
- After submission of your documents, the bank will look into your application form and will verify your documents
- Upon successful verification, the bank will disburse the loan amount to your bank account or will issue a demand draft for the loan amount
If you wish to apply for the loan against credit card through the offline procedure, then you must visit the bank branch, from which you wish to borrow the loan and submit the application form to the concerned official along with the required documents.
A loan against credit card is basically a type of personal loan, only with added benefits. Users tend to be confused between cash withdrawal using a credit card and borrowing a loan against a credit card. To understand this better, it is important for you to know that banks provide a loan against a credit card with your unutilised credit card limit against your existing credit card. On the other hand, when you withdraw cash using a credit card, you are not borrowing a loan from a bank; instead, you are taking out money from the existing limit of your current credit card.
If you are looking for an instant source of money to deal with urgent situations, then a loan against credit card would be the ideal choice for you. You can opt for this type of loan when the cash withdrawal limit of your existing credit card is lesser than your current financial requirements. Additionally, as you would have read above, loans against credit cards come with multiple other benefits as opposed to any other type of loan.